Kotak Mutual Fund has launched Kotak Nifty 50 Index Fund. This would be the latest addition to the over two dozen Nifty index based passive products already available in the market. At its core, Kotak Nifty 50 Index Fund will track the movement of the 50-share NSE index as a low-cost proposition. In recent history, bellwether indices such as Nifty 50 total return index have been difficult to beat for actively-managed largecap equity funds that cost much higher for investors. In this backdrop, Kotak Nifty 50 Index Fund launch assumes importance. Read on to know more details.
The investment objective of the scheme is to replicate the composition of the Nifty 50 and to generate returns that are commensurate with the performance of the NIFTY 50 Index, subject to tracking errors.
The amount collected under the scheme will be invested predominantly in stocks constituting the Nifty 50 Index and / or its exchange traded derivatives and will be invested in equity and equity related instruments and debt and money market instruments.
Kotak Nifty 50 Index Fund is a passively managed open-ended index scheme, therefore change in investment pattern is normally not foreseen.
Other fund details
Minimum investment during NFO is Rs 100 and Re.0.01 for switches.
Minimum SIP purchase is Rs 100 and Re.0.01 for switches.
There are 2 types of plans being offered: Regular Plan and Direct Plan.
There are 3 options on offer: Growth, Payout of Income Distribution cum capital withdrawal and Reinvestment of Income Distribution cum capital withdrawal.
Entry load: Nil
Exit load: Nil
Fund benchmark: Nifty 50 Index TRI
Liquidity: Since this is an open-ended fund, purchase and redemptions will happen at prices related to applicable NAV.
Should you invest in Nifty index funds?
The NIFTY 50 index is a well-diversified 50 companies index reflecting overall market conditions. NIFTY 50 Index is computed using free float market capitalization method.
The top 10 stocks in Nifty 50 are Reliance Industries Ltd., HDFC Bank Ltd., Infosys Ltd., Housing Development Finance Corporation, ICICI Bank Ltd., Tata Consultancy Services Ltd., Kotak Mahindra Bank Ltd., Hindustan Unilever Ltd., Axis Bank Ltd. and ITC Ltd.
Nifty 50 index funds are large-cap funds. If you are confident, Nifty 50 index value over the long-term will increase in value, you should buy a Nifty index fund. Apart from Nifty index funds, there are also Nifty exchange traded funds (ETFs) but you will need a demat account to buy ETFs.
While Kotak Nifty 50 Index Fund is a new scheme, existing large Nifty based index funds are UTI Nifty Index Fund, HDFC Index Fund Nifty 50 Plan, ICICI Prudential Nifty Index Fund, SBI Nifty Index Fund and Franklin India Index Fund – NSE Nifty Plan.
Over the last 5 year period ended April 30, 2021, the Nifty has delivered 14.7 per cent CAGR. But these returns may not come in the next 5 years, so it is important for investors to temper expectations.
Harsha Upadhyaya, President & CIO â€“ Equity, Kotak Mahindra Asset Management Company said, â€œKotak Nifty 50 Index fund is a one-stop solution for long-term wealth creation and is a good choice for investors looking to participate in Indiaâ€™s growth story over the next few decades. As a passive, low cost fund, it allows investors to participate in a diversified portfolio of large cap blue chip companies by tracking Nifty 50 Index.â€